Incorporating International Competitiveness into the Demand for Labour Function: Some Issues of Specification and Interpretation.

This paper attempts to clarify the theoretical status and the empirical role of measures of "international competitiveness" that have been used in econometric demand for labor equations. Some currently popular alternatives are linked to a simple version of the Salter-Swan-Dornbusch (Australian) dependent economy model that is found to provide insufficient basis for choosing between alternative measures, which in the In explaining employment in Australia during the period 1971-83, the preferred competitiveness variable is found to play a marginal role only with estimated long-run elasticity similar to that for the real labor cost. Copyright 1988 by The Economic Society of Australia.